Kroger Announces Merger of Axium Pharmacy and Modern HC Holdings to Create a Combined Specialty Pharmacy

Posted on July 20, 2016 in Administration

Kroger Expands Presence in High-Growth Specialty Pharmacy Market

CINCINNATI and ORLANDO, July 20, 2016 – The Kroger Co. (NYSE: KR) today announced an agreement for Axium Pharmacy Holdings, Inc. (“Axium”) to acquire the outstanding shares of Modern HC Holdings, Inc. (“ModernHEALTH”), a leading specialty pharmacy, to create a combined specialty pharmacy that will operate as a wholly-owned subsidiary of The Kroger Co.

“This strategic investment will accelerate the growth of Kroger’s health and wellness business,” said Robert Clark, Kroger’s senior vice president of merchandising. “Expanding our specialty pharmacy services will provide our customers with greater access to medications we don’t currently dispense and access to additional services without going to another pharmacy.”

ModernHEALTH , based in Orlando, is one of the nation’s largest independent providers of specialty pharmacy services. The company employs approximately 500 associates who provide comprehensive specialty pharmacy services including IVIG for patients who require IV-based therapies for autoimmune and primary immune deficiency diseases, and comprehensive medication management for HIV, Cystic Fibrosis, Transplant, Hepatitis C, Rheumatoid Arthritis and Dermatology.

Kroger is a leading provider of health and wellness services. Kroger operates 2,230 pharmacy locations and195 The Little Clinic locations. The company’s pharmacists also provide health coaching, biometric screening and other wellness services designed to deliver positive health outcomes for patients. Axium, which became a wholly-owned subsidiary of Kroger in 2012, is one of the nation’s largest independent providers of specialty pharmacy services, offering a range of clinical services to patients with complex chronic conditions.

The transaction is subject to certain regulatory approvals, including from the FTC. Financial terms were not disclosed.

Operational Profile

Kroger pharmacy is currently the fifth-largest pharmacy operator in the U.S. and specialty pharmacy is the primary area of growth in pharmaceuticals. Merging ModernHEALTH and Axium into a combined specialty pharmacy should improve purchasing efficiencies and allow the companies to combine each other’s payer strategies to bring down costs. The combination will also allow Kroger’s specialty pharmacy business to expand into new territories in the West and Southwestern U.S., and expand offerings to other disease states.

Headquarters for the combined specialty pharmacy will be located in a new facility under construction in Lake Mary, FL, with continued support from existing facility locations. The combined organization will employ approximately 800 associates and will continue to operate as an independent company within the Kroger family.

“We are very excited to welcome ModernHEALTH’s leadership team and all 500 current associates to the Kroger family,” said Mr. Clark.

“Our partnership with Kroger and Axium will enable us to provide more customers in more places with the critical specialty pharmacy services they need,” said Dom Meffe, ModernHEALTH’s CEO. “We believe this relationship will create efficiencies, accelerate growth in the high-growth specialty pharmacy market, and improve the overall quality of our combined healthcare services. We are also pleased that this partnership means our business headquarters will remain and grow in Orlando.”

With over 20 years of experience in the specialty pharmacy space, Mr. Meffe will lead the new combined business as CEO after close. Before leading ModernHEALTH, Mr. Meffe was founder and CEO of Curascript Pharmacy, a company he led before selling to Express Scripts.

Axium’s CEO, Mark Montgomery, will help ensure a smooth transition after the merger closes. His future plans will be announced at a later date. Mr. Montgomery has been with Axium for 13 years, the last 10 as president and CEO. With nearly 30 years of healthcare leadership experience, he has held instrumental management roles with multiple leading nationwide specialty pharmacy providers.

Jefferies LLC served as ModernHEALTH’s financial advisor, and Ropes and Gray LLP acted as ModernHEALTH’s legal advisor. Jones Day acted as legal advisor to Kroger.

Every day, the Kroger Family of Companies makes a difference in the lives of eight and a half million

customers and 431,000 associates who shop or serve in 2,778 retail food stores under a variety of local banner names in 35 states and the District of Columbia. Kroger and its subsidiaries operate an expanding ClickList offering – a personalized, order online, pick up at the store service – in addition to 2,230 pharmacies, 785 convenience stores, 323 fine jewelry stores, 1,400 supermarket fuel centers and 38 food production plants in the United States. Kroger is recognized as one of America’s most generous companies for its support of more than 100 Feeding America food bank partners, breast cancer research and awareness, the military and their families, and more than 145,000 community organizations including schools. A leader in supplier diversity, Kroger is a proud member of the Billion Dollar Roundtable.